Respuesta :
Answer:
maximum sum of $891.00
Explanation:
given data
Face Value = $1,000
Annual Coupon Rate = 9.50%
Time to Maturity = 15 years
yield to maturity = 11%
to find out
maximum price you should be willing to pay for the bond
solution
we know that Semiannual Coupon Rate will be = 4.75%
so semiannual Coupon will be = Semiannual Coupon Rate × Face Value
semiannual Coupon = 4.75% × $1,000
Semiannual Coupon = $47.50
and Semiannual Period will be for 15 year = 30
and Semiannual yield to maturity will be here YTM = 5.50%
so
Current Price will be here
Current Price = Semiannual Coupon × [tex]\frac{1-(\frac{1}{1+r})^t}{r}[/tex] + [tex]\frac{faevalue}{(1+r)^t}[/tex] ...................1
put here value
Current Price = $47.50 × [tex]\frac{1-(\frac{1}{1.055})^{30}}{0.055}[/tex] + [tex]\frac{}{1.055^{30}}[/tex]
Current Price = $891.00
so pay a maximum sum of $891.00
